The complexity trap

One of the great privileges of my job is that I get to meet a lot of different startups and their founder teams and hear about their ideas, and how they have the ambition to take on the world and conquer it.

Among these great people are also seasoned veterans trying to turn great insights into new startups with, based on pure logic, really interesting potential, but who still seem to struggle raising the necessary funding to take off. And when I come across them, I wonder why it is that they struggle, when everything else seems to check out?

Of course there can be an element of timing. They can be too early for the risk profile, an investor has, or they can be doing their work outside the field of interest to the investor. That all makes a ton of sense. But I think there is something much more fundamental at play.

When I look at what make investors tick, it is things that either cater directly to the particular interests or experience of the investor in question or just seems like a super easy sell in the pitch deck; a story which everybody can understand and relate to.

Let’s face it: As investors we look at a lot of different pitch decks, and I think it’s fair to say that it’s easier to remember and get excited about those with a really compelling, easy-to-understand story that seems like something you have heard about before, than it is connecting to a complex pain and an even more complex solution for something, you have little personal relationship with.

Remember, investors are not experts in everything. Some aren’t even experts in anything except investing (which is also an essential skill, to be sure). And they are not particular fond of being put in a position, where they are reminded of all the things that they don’t know.

When that happens, the lack of insight by experience translate directly to a feeling of increased risk, and instead of getting into a complex discussion, it’s just easier and less painless for the investor to say ‘No’ before the discussion move too far.

And it makes a ton of sense too. Because when you look at startups trying to solve complex problems for complex customers, there is a myriad of questions presenting themselves:

How will you position the product towards the customers? How will you engage in the dialogue and show that you can be of value? How will you onboard users? How will you make them stay? How will you facilitate the necessary changes to the way the customer works in day-to-day operations in order to have the full impact of your product (if it’s a B2B related product, of course) etc. etc.

There are just so many complex moving parts that it more than compensates for any great team or idea. Because as an investor you know that a lot of things have to go the right way in order for this startup to be truly successful. And we are generally not looking for cases where a lot of factors align in the right way, before the startups, we invest in, can become successful.

It’s perhaps a bit brutal and to some extend a crying shame. And the obvious risk of it all is of course that brilliant startups founded on the ‘wrong’ complex pain and solution won’t get the funding they need and thus won’t be able to have an impact on the world and ultimately be successful.

But I just think it’s collateral damage to the way that a lot of investing in startups happen; unless you’re lucky and you have that influential person on the investor side, who has insights gained through experience and just knows that the solution has real merit, you as a founder can have a hard time of getting your startup funded.

So, in essence, the best piece of advice, I can give you, if you’re a founder with a less compelling ‘simple’ story to sell is to really spend time on finding investors – angels, VCs – whatever who has the hands-on background and experience that will make them truly see the potential in what you’re doing and sign off to help you achieve your vision.

Because for complex solutions to complex issues you not only need investment – you also need real hands-on help making it happen.

(Photo by Timo Volz on Unsplash)

Models (kind of) suck

Once upon a time I loved models. I even spent a significant chunk of my own savings getting to know them better in fancy locations around the world.

Models? Work related models, of course. The kind of models you would use for modelling concepts, businesses and such. What did you think?

Never mind.

The point is: I quickly learned that models (any of them) can be deceitful. Just when you think you have figured things out and have the best looking model in front of you, reality strikes. You are torn out of your dream and land, face down, in the ugliness of what real life looks like, when you – as Steve Blank puts it – get out of the building.

Why?

Because (1) models used for conceptualization, business modelling and presentation are inherently based on the past that (2) is seldom a great indicator of the future and (3) has a tendency to not really be able to reflect all the complexity of the real world.

Don’t get me wrong. Models can serve a purpose. They can make things look good and make for nice company and conversation. They can keep you warm and fuzzy, when you need it the most.

Models may give you the impression that all is good and well. That as long as you hold them in your hands, you are in control. When it feels best it almost feels like you’re the same kind of rockstar as a coder, who is super great at developing awesome code.

But you should never grow too fondly attached to the models.

Because the world is more complex than that. It never looks like zeros and ones or simple Post-It’s in a map or 2×2 model.

Never.

(Photo: Pixabay.com)